HMRC has published Revenue & Customs Brief 25/10 announcing the change of policy. Following representations from charities that pay per click advertising should be zero-rated HMRC has reviewed its approach and concluded that it should change the VAT treatment of pay per click advertising supplied to charities.
The Revenue & Customs Brief invites businesses that have supplied pay per click advertising the charities to make claims for overpaid VAT. HMRC say that claims will only be accepted for supplies made in the last four years and subject to the unjust enrichment rules. This means that claims can be made for supplies made in the last four years, i.e. back to 2006 at the time of writing, and the VAT refunded to the charities from which it was collected.
Action to take
Suppliers of pay per click advertising
You should seek confirmation from your charity clients that they qualify for the zero-rating of advertising services using the form of declaration in the VAT Notice on “Charity advertising and goods collected in connection with donations” if you consider it necessary. At the very least you need to show that the service was provided to a charity.
You should also prepare a detailed claim for submission to HMRC. The claim should include as much supporting evidence as possible.
Charities
Contact your pay per click advertising suppliers and request a refund. It will no doubt help your supplier if you provide a list of the invoices involved together with the amounts, and suitable confirmation that you are a charity. You may wish to use the form of declaration shown in Section 10 of VAT Notice 701/58 (January 2010).
If you need further help with this contact your usual VAT adviser.
Would HMRC have broken the law?
HMRC have published Revenue & Customs Brief 21/10 which outlines how hotel booking agents can operate in a way that allows their business clients to recover the VAT on hotel bills. This would clearly reduce the VAT bill of any business using hotel booking agents’ services. So would HMRC have transgressed the rules they had laid out in draft on deliberate wrongdoing by tax agents.
Under the draft legislation a tax agent was defined as anyone who suggested a way in which another person could reduce their tax liability. There was no need for there to be any payment for the advice.
This would suggest that if that legislation was in place HMRC would, by issuing this Revenue & Customs Brief, have broken its own rules and would therefore have to fine itself for deliberate wrongdoing!
In addition, given the amounts of tax involved, it would appear that HMRC would also have to add itself to the published list of deliberate wrongdoers – they’d be named and shamed!
What are your views on this? Add a comment – I’d love to read what you think about this.
Do your VAT returns online?
Here’s some important information for businesses with a VAT return period ending on 28 February 2010:
Do your VAT return before Easter!
Why?
Because HMRC will be upgrading there online system over Easter. And you won’t be able to access the system from Saturday 3 April 2010 until 6 April 2010.
Don’t believe me? Have a look at HMRC’s website where it says:
Normally you would have seven days in which to submit your return. By carrying out this work over Easter HMRC are reducing the time available for you to do your VAT return. My recommendation is to get your VAT return submitted before Saturday to avoid problems that might arise should the work overrun or there be too many trying to do their VAT return on Tuesday 6 April 2010.
Penalties
If you are late submitting your VAT return you will probably be sent a surcharge liability notice. If this is the first time you receive one it means that you are liable to a penalty if you submit a VAT return late in the following twelve months, i.e. for a VAT period ending 28 February 2010 you have to submit all VAT returns, and pay the VAT, on time for all periods up to 28 February 2011.
If you receive a surcharge liability notice and it is not your first, you may be charged a penalty. The penalty will be calculated as a percentage of the tax due, on a rising scale, from 2% to 15%, depending on how many times you have been late with your VAT return.
Frightening, isn’t it?
I’d love to have your comments on this. What do you think? Should HMRC have done this work later in the month to avoid putting unnecessary pressure on businesses?
Fuel Scale charges from 1 May 2010
For periods starting after 30 April 2010
The fuel scale charge applies to all business cars which are used for
private motoring. The following table sets out the fuel scale charges
for VAT periods commencing after 30 April 2010.
The amount listed under Scale Charge is the VAT inclusive amount. You need to subtract the VAT due to get the figure to include in Box 6 on your VAT Return.
For vehicles which do not have a CO2 emissions figure, you should identify the CO2 band based on engine size, as follows:
Whilst every effort has been made to ensure that the figures in the following tables are accurate you should still check that the figures are correct.
| 12 Month return | Three Month return | One Month return | ||||
| CO2 Emissions Figure | Scale Charge | VAT due per vehicle | Scale charge | VAT due per vehicle | Scale charge | VAT due per vehicle |
| £ | £ | £ | £ | £ | £ | |
|
120 or below |
570.00 |
84.89 |
141.00 |
21.00 |
47.00 |
7.00 |
| 125 | 850.00 | 126.60 | 212.00 | 31.57 | 70.00 | 10.43 |
| 130 | 850.00 | 126.60 | 212.00 | 31.57 | 70.00 | 10.43 |
| 135 | 910.00 | 135.53 | 227.00 | 33.81 | 75.00 | 11.17 |
| 140 | 965.00 | 143.72 | 241.00 | 35.89 | 80.00 | 11.91 |
| 145 | 1020.00 | 151.91 | 255.00 | 37.98 | 85.00 | 12.66 |
| 150 | 1080.00 | 160.85 | 269.00 | 40.06 | 89.00 | 13.26 |
| 155 | 1135.00 | 169.04 | 283.00 | 42.15 | 94.00 | 14.00 |
| 160 | 1190.00 | 177.23 | 297.00 | 44.23 | 99.00 | 14.74 |
| 165 | 1250.00 | 186.17 | 312.00 | 46.47 | 104.00 | 15.49 |
| 170 | 1305.00 | 194.36 | 326.00 | 48.55 | 108.00 | 16.09 |
| 175 | 1360.00 | 202.55 | 340.00 | 50.64 | 113.00 | 16.83 |
| 180 | 1420.00 | 211.49 | 354.00 | 52.72 | 118.00 | 17.57 |
| 185 | 1475.00 | 219.68 | 368.00 | 54.81 | 122.00 | 18.17 |
| 190 | 1530.00 | 227.87 | 383.00 | 57.04 | 127.00 | 18.91 |
| 195 | 1590.00 | 236.81 | 397.00 | 59.13 | 132.00 | 19.66 |
| 200 | 1645.00 | 245.00 | 411.00 | 61.21 | 137.00 | 20.40 |
| 205 | 1705.00 | 253.94 | 425.00 | 63.30 | 141.00 | 21.00 |
| 210 | 1760.00 | 262.13 | 439.00 | 65.38 | 146.00 | 21.74 |
| 215 | 1815.00 | 270.32 | 454.00 | 67.62 | 151.00 | 22.49 |
| 220 | 1875.00 | 279.26 | 468.00 | 69.70 | 156.00 | 23.23 |
| 225 | 1930.00 | 287.45 | 482.00 | 71.79 | 160.00 | 23.83 |
| 230 or above | 1985.00 | 295.64 | 496.00 | 73.87 | 165.00 | 24.57 |
A salutary tale for the new business…
Remember to check your turnover every month if you are close to the VAT registration limit…
Why?
I had a phone call yesterday from a tax adviser. They had a client who had gone over the registration limit, albeit briefly, three years ago. The client decided to take no action as they expected their turnover to fall below the registration limit during the following year.
What they overlooked is that there is a requirement to notify HM Revenue & Customs (HMRC) that they had exceeded the VAT registration limit within 30 days. Because they took no action they left themselves open to a penalty for failing to notify HMRC that they’d exceeded the VAT registration limit.
HMRC intervene
As it happens, HMRC did notice the failure to notify when they were reviewing the business’s tax returns. This is one of the downsides for the taxpayer of the merger five years ago of Customs & Excise and the Inland Revenue.
As a result of this, HMRC have compulsorily VAT registered the business, and are now seeking back tax and a penalty.
The worst thing is that this was completely avoidable, and there would have been no back tax to pay. Had the business notified HMRC in time it could also have applied for exemption from VAT registration on the basis that it expected its turnover in the next 12 months to be below the VAT registration limit.
How to avoid this happening to you
You can avoid this penalty trap by keeping track of your taxable turnover at the end of every month for the past twelve months. As soon as you see that you have exceeded the VAT registration limit you have to notify HMRC. If you expect your turnover in the following 12 months to fall below the registration limit you can apply for exemption from VAT when you notify HMRC.
If you find yourself in this position and need help, ask your accountant, bookkeeper or a VAT specialist.
If you have any questions or comments on this I’d love to hear from you – use the comments section below.
